Tuesday, April 11, 2017

Startup Opportunity: The YouTube Advertiser Meltdown

So YouTube is having some trouble with advertisers of late

Many channels are seeing their revenues plummet as big companies pull their ads out of fear they will be shown in more controversial videos. I have spent the last few months exploring some of these more extreme channels and I sympathize with companies that don't want their products featured in videos about "race realism" or how illegal immigrants are ruining America. Strictly speaking it isn't censorship when Youtube removes a channel for being politically too extreme. Still, we should ask ourselves how comfortable we are with large corporations essentially setting the terms of acceptable political discourse by pressuring media platforms into banning unpopular opinions.

The problem now is more widespread than just a few companies focusing on a few political extremists. Several of the biggest media companies are now pulling ads. H3H3 did a video recently suggesting that this issue is not just about companies protecting their brand, but really more about the old media trying to undermine Google and internet advertising generally (the original video was taken down recently due to mistake in their reporting, but the above link covers their general thesis).

Regardless of the advertising companies' endgame Youtube's response has been, shall we say, unfortunate. The LGBT restricted mode fiasco did not do them any favors. It speaks to their tricky position. Some brands may indeed not want to associate with LGBT content. However putting LGBT videos in their own restricted little box is discriminatory.

So how do we resolve this dilemma? Some argue that content creators should just try to find other outlets. There is the extreme anti-copyright view that all art and content should be free anyway, and creators should make money through other means. I do not agree with this. Talented Youtubers should be able to earn a living from their work I think. But how do we allow them to get compensated for attracting viewers with quality work while giving companies control over their brands?

I see two ways forward for the internet and its creative class:

1. A smarter advertising-based model.

2. A model that does not rely on advertising.

Approach #1 is likely much easier. Youtube need not take a sledgehammer to the problem by blocking controversial channels about right wing politics, veganism, or LGBT issues. As the Guardian article shows that's only going to piss people off and lead to inane debates about censorship (omg free speech! omg they're a private company they can do whatever! omg!). The thing is, alt-right, vegan, and LGBT videos, get lots of views, and likely there are many advertisers that want those eyeballs. Dating sites, gardening tools, gun companies, for example. Give companies more targeted ways of shilling their products exactly where they want, and the advertising revenue game can continue as before.

Approach #2 is more disruptive. The idea here is to give content consumers an easy way to directly compensate content creators. I like the idea of cutting out the corporate advertiser 3rd party since advertisers tend to influence creators in unfortunate ways. The problem with this approach is really more logistical. How do you make it effortless for consumers? Patreon is a good start. It still blocks "hate speech," and is suboptimal in some other ways. But I am glad they exist.

How do we make it even easier for consumers? Cable TV and Netflix are a good standard. I pay a monthly fee, some of it goes back to creators. But what about for Youtube, or blogs, or other content sources? Perhaps what we need is a browser plugin with a wallet that allows for microtransactions. It could charge a user a penny for every page load on a creator's blog. With sufficient adoption you could have thousands of creators being directly compensated by hundreds of thousands of consumers with no advertising middleman. I'm sure others could envision far better ideas than that.

So which is right, approach #1 or #2? Perhaps the answer is:


And that's why I titled this post "Startup Opportunity." Ultimately I don't think approach #2 can work by itself. Advertising is a fundamental type of human interaction. I make something. I want to sell it. I have to tell people about it. Advertising as a concept is not going away; there's just too much money in it. However if a startup can find a way to do it smarter and / or help creators not need it, I think they could make a lot of money.

I have some ideas for both approaches but I'm kind of busy with my other project at the moment...